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Whistleblowers

Whistleblowers are the key to exposing corporate wrongdoing and government fraud. Someone who has first-hand knowledge of fraud or other wrongdoing may have a whistleblower case.

A whistleblower may sue on behalf of the government when they witness fraud, waste and abuse in government programs, and may be eligible to receive a portion of any money recovered by the government, up to 30 percent, as a whistleblower reward. There are also whistleblower protection provisions in place to assist whistleblowers who may face retaliation as a result of reporting wrongdoing.

In Fiscal Year 2016, the DOJ reported that it recovered more than $4.7 billion in civil settlements and judgments under the False Claims Act. This is the third highest annual recovery in False Claims Act history, bringing the fiscal year average to nearly $4 billion since fiscal year 2009, and the total recovery during that period to $31.3 billion.

Most of those claims involved health care fraud against Medicare, Medicaid and other government health care programs and the health care industry, including drug companies, medical device companies, hospitals, nursing homes, laboratories, and physicians. This is the seventh consecutive year the Department’s civil health care fraud recoveries have exceeded $2 billion.

In addition to claims involving health care fraud, whistleblowers may file claims of government fraud across a broad spectrum of industries. These include aerospace, Defense contractors, and the nuclear power industry.

Before blowing the whistle, it is very important to secure all proper and legal documentation, and make sure there is a valid claim under either the federal or a state’s False Claims Act.

Separate from the False Claims Act, new laws also have been established to provide whistleblower protections for people who want to report fraud involving the Internal Revenue Service (IRS), called the IRS Whistleblower Law; and the Securities Exchange Commission (SEC), established under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and commonly referred to as the SEC Whistleblower Law. Dodd-Frank also established the whistleblower program for the U.S. Commodity Futures Trading Commission (CFTC), which provides monetary incentives to individuals who report possible violations of the Commodity Exchange Act that lead to a successful enforcement action, as well as privacy, confidentiality, and anti-retaliation protections for whistleblowers. Most recently, Auto Manufacturer Whistleblower laws were put into place with the establishment of the Motor Vehicle Safety Whistleblower Act, protected by the Moving Ahead for Progress in the 21st Century Act (MAP-21). These cases have made a positive impact on our society by unveiling rampant corruption.

What is the False Claims Act (FCA)?

The False Claims Act (FCA) – also called the Qui Tam statute – is a federal law that was first established by Congress in 1863 to allow everyday citizens the opportunity to file a lawsuit on behalf of the United States when they believe an individual or company is defrauding the government.

The False Claims Act holds liable those who knowingly submit, or cause another entity or person to submit false claims for payment of government funds. Those found responsible for fraud are liable for three times the government’s damages plus civil penalties of $5,500 to $11,000 per false claim.

Those who choose to come forward and report the wrongdoing through an FCA lawsuit, better known as “whistleblowers,” are entitled to between 15 and 30 percent of the amount recovered by the government due to the “qui tam” provision of the FCA.

Although originally coined the “Lincoln Law” due to its beginnings in the Civil War Era, the FCA works to not only protect those who “blow the whistle” on the misconduct, but also ensures that they are compensated for their time and effort.

In addition to the federal False Claims Act, many states also have False Claims Acts that work in a similar fashion.

Whistleblower Reward

In 1986, Congress strengthened the False Claims Act by amending it to increase incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government.

According to the U.S. Department of Justice (DOJ), whistleblowers filed 702 qui tam suits in fiscal year 2016, and the Department recovered $2.9 billion in these and earlier filed suits this past year. The government awarded the whistleblowers $519 million during the same period.

Whistleblower Protection

There also is a part of the False Claims Act that is known as the whistleblower protection provision. This provision ensures that if you are fired, demoted, suspended, threatened or discriminated against in any other way by an employer as a result of your filing a report of fraud, that you will be reinstated to your former position. This includes receiving any seniority that may have been affected, as well as back pay, interest and other compensation that may be due as a result of damages or losses you suffered as a result of filing a claim.

Before Blowing the Whistle

Before you report suspected fraud or other wrongdoing – before you “blow the whistle” – it is important to make sure you have a valid claim and that you are prepared for what lies ahead. Here are some things to consider:

Be hands-on – A whistleblower has to have first-hand knowledge of the fraud or other wrongdoing in order to file a claim. It is important to have physical evidence such as documents, emails, invoices, billing statements or other materials that support your allegations. These materials must be things the whistleblower collected from the employer, organization or entity. They cannot be public records, or information from another source.

Be specific – Identify the “who, what, when and where” of the fraud. Organize your information and, if possible, create a timeline for the fraudulent conduct. You will be required to explain why the conduct is fraudulent. As an employee familiar with your company’s procedures, and industry standards for those procedures, you are uniquely qualified to spot fraud, where others may miss it or assume it is a standard business practice.

Verify criteria – In order to file a federal False Claims Act, the fraud must be against the U.S. Government. You may file a state False Claims Act, provided your state has one, if state funds are affected by the fraud.

Determine motive – The fraud must have been committed willingly and deliberately. Mismanagement is not a cause for a whistleblower claim.

Check yourself – If you are a government employee who witnesses fraud against the government, you may need to first make an effort to report the fraud through channels within your agency before filing a whistleblower lawsuit. Talk to an attorney to determine if you should take this course.

Talk to a whistleblower attorney – An experienced whistleblower attorney is an important ally in bringing wrongdoers to justice. It is advisable to talk to an experienced whistleblower lawyer before filing any claim or reporting the wrongdoing. A whistleblower lawyer will be able to help you navigate a potential claim, and guide you through what is often a long process. Although your information will initially be kept confidential, you will eventually be identified as the whistleblower. Your lawyer can help you obtain whistleblower protections available under the False Claims Act. Taxpayers Against Fraud (TAF) has created this helpful video to illustrate what may be involved in filing a whistleblower lawsuit.

Health Care Fraud

Health care fraud involves the filing of dishonest heath care claims in order to turn a profit. Examples of practitioner schemes include a health care provider who bills Medicare for services that were not performed or were unnecessary, double-billing, billing for a non-covered service as a covered service, modifying medical records, intentionally reporting incorrect diagnoses in order to maximize payment, and prescribing unnecessary treatment.

IRS Whistleblower

Quite simply, the IRS Whistleblower law provides for payment to people who report – or “blow the whistle on” – people who fail to pay the tax they owe.

The Federal False Claims Act explicitly excludes tax fraud as do most state False Claims Acts. However, there is an IRS Whistleblower law, separate from the Federal False Claims Act, which provides for up to triple damages and whistleblower awards of 15 to 30 percent of the amount recovered. In simple terms, if the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.

To file under this section of the law, the tax, penalties, interest, and additions in dispute must total a sum in excess of $2,000,000, and a few other provisions must be met. If the case involves an individual who is not paying taxes, his or her annual gross income must be more than $200,000. There is another IRS Whistleblower award program for cases that do not meet these criteria. The award is less, with a maximum of 15 percent up to $10 million, and the award is discretionary.

Additionally, the Whistleblower Protection Act of 1989 is a federal law that protects federal whistleblowers who work for the government and report agency misconduct. Employers are forbidden from retaliating against employees who file complaints. An employee may file a complaint about matters involving violation of a law, rule or regulation; gross mismanagement; gross waste of funds; abuse of authority; or substantial and specific danger to public health or safety.

In its 2016 annual report to Congress, the IRS Whistleblower Office reported paying out 418 awards to whistleblowers in the previous year. That means fiscal year 2016 ended with a 322 percent increase in the number of whistleblower awards from 2015, in which only 99 awards were paid out. The number of claims also went up 6.4 percent since 2015 and the number of case closures increased 99 percent.

Awards paid by the IRS to whistleblowers in 2016 totaled $61 million. Since 2007 information submitted by whistleblowers has assisted the IRS in collecting $3.4 billion in revenue, and, in turn, the IRS has approved more than $465 million in monetary awards to whistleblowers.

SEC Whistleblower

In cases of fraud within the financial services industry, whistleblower protection is provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as the Securities Exchange Commission (SEC) Whistleblower Law. This is a federal statute signed into law by President Obama on July 12, 2010. It represented a major change in the American financial regulatory environment, and affects almost every aspect of the nation’s financial services industry.

The SEC Whistleblower Act also gives the SEC powers of enforcement, including a “whistleblower bounty program.” This allows people who provide information that leads to successful SEC enforcement to receive 10 to 30 percent of the monetary sanctions over $1 million.

Additionally, the Act amends the SEC Act of 1934 and the Investment Company Act of 1940 to allow the SEC to not disclose records or information that have been obtained for uses such as “surveillance, risk assessments, or other regulatory and oversight activities.” The only exception is for judicial or congressional inquiry.

The Act was a response to the U.S. financial crisis that included bail-outs of major investment firms and banks, designed to prevent a collapse. It is hoped these new regulations will increase transparency within the financial services industry, protect consumers from investment fraud, and provide tools for managing future financial crises. It also provides international standards for the industry.

The Whistleblower Protection Act of 1989 is a federal law that protects federal whistleblowers who work for the government and report agency misconduct. Employers are forbidden from retaliating against employees because they file complaints. An employee may file a complaint about matters involving violation of a law, rule or regulation; gross mismanagement; gross waste of funds; abuse of authority; or substantial and specific danger to public health or safety.

Since the inception of its whistleblower program, the SEC has awarded $158 million to 46 whistleblowers who provided the SEC with original and useful information that led to a successful enforcement action.

Auto Manufacturing Whistleblower

The need for effective auto industry whistleblower laws and protections has become ever clearer in recent years amid a series of scandals that led to record penalties and recalls, such as the GM ignition switch defect, Takata exploding airbags, and VW emissions cheat fraud.

Whistleblowers in the auto industry are protected by the Moving Ahead for Progress in the 21st Century Act (MAP-21). Enacted by the Occupational Health and Safety Administration (OSHA) in July 2012, MAP-21 protects employees of automobile manufacturers, auto part suppliers, and car dealerships who have been terminated or otherwise retaliated against for voicing concerns to their employer or to federal regulators over auto defects or violations of motor vehicle safety standards. Effective Dec. 14, 2016, OSHA published a final rule establishing procedures and timeframes for handling whistleblower retaliation complaints within the automobile industry.

In order to further encourage whistleblowers to come forward, in December 2015 Congress created the Motor Vehicle Safety Whistleblower Act (MVSWA). The MVSWA provides financial incentives to whistleblowers in the auto industry to bring forward safety concerns. Advocates believe the MVSWA will be as successful as the False Claims act in fighting fraud and other misconduct in the automobile industry.

The MVSWA provides protections and awards to whistleblowers who voluntarily provide federal regulators information relating to motor vehicle defects, noncompliance, or violations of notification or reporting requirements that create an unreasonable risk of death or serious physical injury. A whistleblower must be an employee or contractor of a motor-vehicle manufacturer, parts supplier (i.e., manufacturer of motor-vehicle equipment), or dealership.

Whistleblowers whose tips lead to penalties of $1 million or more will be awarded up to 30 percent of the total sanctions against the violating company.

Aerospace Whistleblower

The aerospace industry encompasses manufacturers and suppliers of civil, military and business aircraft, helicopters, unmanned aircraft systems, space systems, aircraft engines, missiles, material and related components, equipment, services and information technology. Basically, companies in this field engage in research, design, manufacturing, operation and maintenance of vehicles that move through air and space. In most industrial countries, the aerospace industry is a cooperation of public and private industries.

When an individual or company acting as a defense contractor knowingly deceives the government in order to receive personal benefit, usually financial, this is fraud and a violation of the False Claims Act (FCA). In 1863, Congress enacted the False Claims Act (also called the “Lincoln Law”) to hold individuals and companies responsible when they defraud governmental programs.

Types of fraud that may occur in the aerospace industry include:

Deliberately inflating prices on contracts

Failing to meet the specifications required by the contract

Supplying defective or inferior parts or goods

Defense Contractor Whistleblower

A defense contractor is defined as any person or company who enters into a contract with the United States government related to national defense. They may provide goods or services, or both. These goods and services are used for the production of material or for the performance of services for national defense. Usually the contract is with a branch of the U.S. military. Jobs commonly performed by defense contractors include data protection and purchasing and procurement services.

When an individual or company acting as a defense contractor knowingly deceives the government in order to receive personal benefit, usually financial, this is fraud and a violation of the False Claims Act (FCA). In 1863, Congress enacted the False Claims Act (FCA) to hold individuals and companies responsible when they defraud governmental programs.

Types of defense contractor fraud include:

billing the government for time spent on a commercial job or other project,

charging multiple times for the same service,

substituting a cheaper or inferior product for one originally promised but still billing for the more expensive or better product.

Nuclear Power Whistleblower

Nuclear power is the use of sustained nuclear fission to generate heat and electricity. The U.S. is the world’s largest producer of nuclear power, accounting for more than 30 percent of worldwide nuclear generation of electricity, according to the World Nuclear Association. The U.S. has 104 nuclear power reactors in 31 states, operated by 30 different power companies. There are 69 pressurized water reactors (PWRs). Almost all the U.S. nuclear generating capacity comes from reactors built between 1967 and 1990.

The Nuclear Regulatory Commission (NRC) is the government agency established in 1974 to be responsible for regulation of the nuclear industry. In particular, it oversees reactors, fuel cycle facilities, materials and wastes, as well as other civil uses of nuclear materials. Performance against 19 key indicators is reported by nuclear power generating facilities to the NRC each quarter, and made available to the public through the NRC website. The plant is rated as to whether it is operating normally, requires regulatory oversight, provoking regulatory action, or unacceptable, in which case it would probably be shut down. The 19 criteria include 14 indicators on plant safety, two on radiation safety, and three on security.

When an individual or company acting as a defense contractor knowingly deceives the government in order to receive personal benefit, usually financial, this is fraud and a violation of the False Claims Act (FCA). In 1863, Congress enacted the False Claims Act (also called the “Lincoln Law”) to hold individuals and companies responsible when they defraud governmental programs.

Types of abuse that occurs in nuclear power industry include:

Failing to conduct required safety inspections but reporting them as complete

Failure to implement and enforce proper worker safety standards

Unmanaged disposal of nuclear waste

Supply fraud

State False Claims Act

In addition to the federal False Claims Act, which targets fraud against the U.S. government, some states have their own False Claims Act, which allows citizens to report fraud, waste or abuse affecting state government. Not all states have a False Claims Act, and not all State FCAs encompass all types of fraud. For example, some state FCAs are only used to identify and prosecute Medicaid fraud. Whistleblowers whose state does not have a FCA or whose state FCA doesn’t encompass other types of fraud, should talk with a lawyer about their options for filing as a relator under the qui tam provisions of the federal False Claims Act.

Whistleblower Attorney

An experienced whistleblower attorney is an important ally in bringing wrongdoers to justice. It is advisable to talk to an experienced whistleblower lawyer before filing any claim or reporting the wrongdoing. Beasley Allen has a talented team of attorneys dedicated to pursuing whistleblower cases. We would like to meet with you CONFIDENTIALLY to review your potential whistleblower claim.

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